Torrent Power Limited vs Gujarat Electricity Regulatory Commission on 8 July 2026

JUDGEMENT

PER HON’BLE MRS. SEEMA GUPTA, OFFICIATING CHAIRPERSON

1. The present batch of appeals has been filed by Torrent Power Limited (“the Appellant/TPL”), assailing the Tariff Orders dated 31.03.2020 (“impugned orders”) as well as the order dated 12.05.2025 passed in Review Petition (“Impugned Review Order”) by Gujarat Electricity Regulatory Commission

(hereinafter referred to as “State Commission/GERC”) for the Truing-Up for FY 2018-19 and determination of Tariff for FY 2020-21 for their three licensed area of supply within the State of Gujarat, details whereof are set out below:

2. Since, the issues involved in above said impugned orders are similar and arise out of identical factual and legal circumstances regarding the regulatory treatment of uncovered FPPPA revenue and the denial of carrying cost, the present batch of Appeals is being adjudicated and disposed of by way of this common judgment. DESCRIPTION OF PARTIES:

3. The Appellant herein, the Torrent Power Limited (“TPL”) is a Company formed under the provisions of the Companies Act, 1956 and is in the business of generation, transmission and distribution of electricity.

4. The Respondent No. 1 is the Gujarat Electricity Regulatory Commission (hereinafter referred as “State Commission/GERC”), established under the provisions of the repealed Electricity Regulatory Commission Act, 1998 and so continued in office, by virtue of Section 82 of the Electricity Act, 2003 (“the Act”). FACTUAL MATRIX OF THE CASE: -

5. Appellant filed Petitions before the State Commission for the True-up of FY 2018-19 and for determination of tariff for its distribution business for supply of Sl. Geographical Area of Supply Appeal No. Petition No. Dated

1. Surat

31.03.2020

2. Dahej of

31.03.2020

3. Ahmedabad- Gandhinagar of

31.03.2020

electricity for the FY 2020-21 for the abovementioned circles in the State of Gujarat.

6. On 31.03.2020, the Respondent Commission, passed the impugned orders for the True-up of FY 2018-19 and for determination of tariff for the F.Y. 2020-21 for all the three circles separately. Subsequently, the Appellant filed Petitions seeking Rectification cum Review of the order dated 31.03.2020 before the State Commission, inter alia, raising the following issues: i. Actual cost of generation of TPL-G considered instead of cost of scheduled generation of TPL-D towards power purchase cost. ii. Ignoring wheeling losses of LT Consumers. iii. Failure to compute cross subsidy surcharge for high tension maximum demand of metro rail. iv. Inconsistency in directions issued regarding fuel and power purchase cost adjustment (FPPCA). v. Error in consideration of provisional revenue to compute revenue gap/surplus. vi. Failure to segregate recovery of earlier years approved gap/surplus.

7. Vide order dated 12.05.2025, State Commission partly allowed the Review Petition; however, the claim pertaining to carrying cost was disallowed. Aggrieved by the findings and conclusions recorded in the Impugned Orders, the Appellant filed the present batch of appeals. ANALYSIS & DISCUSSION:-

8. Appellant has raised following two issues, which are common in all the three appeals for the adjudication: -

(a) GERC erred in considering provisional revenue instead of actual revenue while determining the Gap /(Surplus) for FY 2018–19 during the true-up exercise.

(b) GERC erred in denying carrying cost on approved past-period gaps. Heard Mr. Amit Kapur, Learned Counsel appearing on behalf of Appellant, Mr. Sitesh Mukherjee, Learned Senior Counsel appearing on behalf of Respondent No.1 on the above issues, perused Impugned Orders, Written Submissions filed by the parties and other documents placed on record. The issues are deliberated below: ISSUE A: Consideration of provisional revenue instead of Accrual Revenue while determining Gap/surplus during True up of FY 2018-19

9. It is submitted on behalf of Appellant that subsequent to adoption of Ind AS-

for the year FY 2018-19, TPL was required to recognize provisional/unrecovered revenue on an accrual basis in its books of accounts corresponding to all approved and legitimate expenses which are yet to be approved by commission and even yet to be recovered from consumers. However, Appellant submitted revenue gap for FY 2018-19 on the basis of billed revenue for all the three circles and this billed amount excludes the amount specifically disclosed under Note 44. GERC in the Impugned Orders relied upon Note 29 of the Audited Accounts, while completely ignoring Note 44, which clarified the impact due to adoption of Ind AS 115. Details of billed revenue, accrued revenue and approved Revenue as per Ind AS 115 in Impugned Orders is submitted for FY 2018-19 for the three circles:

Rs. in Crore S.No. Particulars Surat (Appeal 475/22) Dahej (Appeal 476/22) Ahmedabad- Gandhinagar (Appeal 189/23)

1. Billed Revenue 2279.66 192.50 5624.47

2. Accrued Revenue 43.26 24.11 263.35

3. Total Revenue as per Ind AS 115 2322.92 216.60 5887.82

10. Learned Senior Counsel appearing on the behalf of State Commission does not dispute that revenue has been considered in terms of Audited accounts however, contended that Note 44 reveals that accrued revenue is entirely attributable to FPPPA claims recognized during the final quarter (Q4) of FY 2018- 19 which were recognized only when billed to consumers. Pursuant to TPL's own communication dated 30.04.2019, which confirmed the billing at the updated FPPPA rate of Rs. 2.11 per kWh commencing from the billing month of April 2019 and therefore, in a rolling account, these amounts were physically received within weeks of the fiscal year-end, and the underlying accrual gap was accordingly liquidated. It is further submitted that the total audited eligible FPPPA rate was Rs. 2.66 per unit. By billing at Rs. 2.11 per kWh, the TPL secured recovery of the base cost along with its incremental cost pool from the very first month of the subsequent financial year, rather than waiting for a two-year true-up cycle. Under the First-In-First-Out (FIFO) principle of regulatory accounting, the initial revenue collected in a new period automatically liquidates the oldest outstanding operational deficits of the preceding period. The Rs. 37.86 Crore variance (difference between actual audited FPPPA cost of Rs. 195.64 Crore and provisional booking of Rs. 157.78 Crore for Q4 FY 2018-19) was completely liquidated through the cash inflow of Rs. 195.64 Crore collected in Q1 of FY 2019-

20.

11. In response to the contention of State Commission, that FPPPA pertaining to Q4 of FY 2018–19 was recovered in Q1 of FY 2019–20, and the accrued FPPPA revenue had already been considered in FY 2018–19 itself, Appellant relied upon the judgment of the Hon’ble Supreme Court in Mohinder Singh Gill v. Chief Election Commissioner & Anr., (1978) 1 SCC 405 to emphasize the settled legal position that the GERC cannot supplement, improve, or sustain the Impugned Order by advancing fresh reasons not contained therein. Without prejudice to this contention, Appellant vide its affidavit dated 05.05.2026 submitted quarterly FPPPA details for FY 2017-18, 2018-19, and 2019-20 to demonstrate that the FPPPA revenue pertaining to Q4 of a financial year was consistently treated as part of billed revenue on a provisional basis in the same financial year; the differential between provisional Q4 booking and actual Q1 recovery was treated as FPPPA revenue of the succeeding year. Such methodology was consistently followed even prior to adoption of Ind AS-115 and the same is recorded in Note 41/44 of the Respective Accounts. Specifically, the differential amounts of Rs. 37.86 Crore in respect of Surat (Appeal No. 475 of 2022), Rs. 2.35 Crore in respect of Dahej (Appeal No. 476 of 2022), and Rs. 147.79 Crore in respect of Ahmedabad-Gandhinagar (Appeal No. 189 of 2023). In each case, the said differential formed part of the total FPPPA revenue — being Rs. 685.81 Crore (Surat), Rs. 62.28 Crore (Dahej), and Rs. 1,621.73 Crore (Ahmedabad-Gandhinagar) — reflected in Form-10 of the respective Truing-up Petitions for FY 2019-20 as part of total revenues of Rs. 2,326.15 Crore, Rs. 239.87 Crore, and Rs. 5,729.75 Crore respectively, which were subsequently approved by GERC as revenue from 'Sale of Power' for FY 2019-20 at Paragraph 4.7.12 of the Truing-up Order (Surat and Ahmedabad-Gandhinagar) and Paragraph 4.6.11 of the Truing-up Order (Dahej). It is, therefore, submitted that the same differential amounts cannot again be attributed to FY 2018-19 under

GERC's FIFO theory, since they already stand accounted for and approved as revenue for FY 2019-20 — a re-attribution would result in an impermissible duplication and double counting of revenue across all three licensed areas of supply.

12. The reliance placed by Appellant upon Mohinder Singh Gill v. Chief Election Commissioner & Anr., (1978) 1 SCC 405, to confine the Appellate Tribunal to only the recorded reasoning of the Regulatory Commission is misplaced. The dictum in Mohinder Singh Gill was rendered in the context of administrative orders, where supplementation of reasons post facto would undermine transparency and accountability. In the said judgement, the Supreme Court left it to the Election Tribunal (i.e. the High Court hearing the Election Petition filed by the Respondent) to examine the election petition on its merits. Accepting the contention of Appellant would mean that this Tribunal would be required, after setting aside the impugned tariff order, to remand the matter to the Commission to pass an order afresh assigning reasons. The appellate jurisdiction conferred upon this Tribunal under Section 111 of the Electricity Act, 2003, is distinct and wider in scope. As the first appellate forum, APTEL is mandated to examine the legality, propriety and correctness of the impugned order on both facts and law based on the entire record of proceedings before the Commission. A first appeal is a rehearing of the original proceedings, and the appellate forum possesses all powers, jurisdiction and authority as the forum of first instance, the jurisdiction and range of subjects being co-extensive (“Southern Power Distribution Company of AP Limited v. Andhra Pradesh Electricity Regulatory Commission, 2022 SCC OnLine APTEL 110; H-Energy (P) Ltd. v. Petroleum & Natural Gas Regulatory Board, 2023 SCC OnLine APTEL 17). In the present case, we shall accordingly proceed to decide the issue on its merit.

13. We note from the details submitted by TPL vide its respective affidavit dated 01.05.2026, the billing details for FY 2018-19 and FY 2019-20 for all the three circles. For example, for Surat (Appeal 475 of 2022), the billed revenue as submitted in Form 10 of the Petition is indicated as Rs. 2279.66 Crore, while the total revenue as per Ind AS 115 (Note 29) is Rs 2322.92 Crore, which has been considered in the Impugned Order for working out the gap/surplus. It is also observed from Note 44 that “Consequent to adoption of Ind AS 115, Revenue from Operations and Profit for the year ended 31st march 2019 are higher by Rs 43.26 Crore”. It is to note from the review order dated 12.05.2025, that as TPL has claimed total tax on the total revenue (Rs 2322.92 Crore) of Rs 14.75 Crore, same was approved by the commission and approved the revenue from sale of Power as Rs 2322.92 Crore. Likewise, the details are for other two circles. Therefore, , there is no doubt that revenue approved in True up of FY 2018-19 for all the three circles includes accrued revenue also as indicated in the Note 44 of respective audited accounts and as noted from the submissions of TPL as noted above.

14. In terms of Regulation 21 of the GERC MYT Regulations 2016, the scope of truing up shall be the comparison of audited performance of Applicant for the previous financial year with the approved forecast for such previous financial year, subject to prudence check. Our attention has been drawn towards True-up exercises for future years (FY 2019-20, FY 2020-21, FY 2021-22), in which GERC approved revenue on billed basis. By Order dated 12.11.2025 in Review Petition No. 20 of 2024 (in respect of Truing-Up for FY 2022-23), GERC expressly held that revenue for tariff determination must be based on the Tariff Schedule approved by the Commission (i.e., billed revenue), corrected the error of considering it on accrual basis. Relevant portion is extracted hereunder:

“"Erroneous consideration of revenue for FY 2022-23 on accrual basis 17.1 We note that the petitioner has submitted that it has adopted Ind AS 115, which requires booking of revenue corresponding to all the approved/to be approved legitimate expenses. Therefore, the recognition of revenue is based on accrual basis. The Petitioner further submitted that in the Form 10 of the petition, the Petitioner provided the detailed computation of revenue as per approved Tariff and FPPPA for recovery billed during the year. 17.2 We note that the issue of revenue consideration as per Ind AS 115 was dealt in subsequent years i.e. FY 19-20, 20-21 and 21-22 as the Petitioner had furnished the Auditor's certificate along with necessary reconciliation of revenue. Accordingly, the Commission had allowed revenue claimed by the Petitioner. We also observed that the Commission has allowed recovery of difference in revenue as per Accounts and revenue claimed in the Petition for FY 22-23 in subsequent period. Thus, the Revenue to be considered in the Tariff Petition is distinct than the Revenue shown in Accounts. The Revenue to be considered for Tariff determination has to be as per Tariff Schedule approved by the Commission. We also observe that the norms of Income tax allowance has changed in the Tariff Regulations, 2024, however, Revenue consideration as per approved Tariff remained the same in Tariff Regulations 2024. We also observe that consideration of higher revenue affects the Revenue Gap and consequent carrying cost on the end consumers. 17.3 In view of above, we hold that claim of the Petitioner for consideration of revenue for FY 2022-23 on billed basis is in line with GERC Tariff Regulations and accordingly allowed."

15. Thus, as per GERC’s own interpretation of their Regulation, the revenue is to be considered as per billed Revenue and has been accordingly considered for the future years. Therefore, considering revenue on Accrual basis under True up for FY 2018-19 would inflate the Revenue and consequently reduce the gap or lead to surplus. In the Impugned Orders, no justification/rational has been provided for considering the revenue on accrual basis, except that since it was as indicated in the audited accounts and income tax has been claimed and approved on the total revenue including accrued and it is a departure from previous years methodology. We find merit in the submissions advanced on

behalf of Appellant that FPPPA adjustment of Rs. 37.86 Crore being recovered in FY 2019-20 has been considered in the revenue of FY 2019-20, same cannot be considered as part of accrued revenue for FY 2018-19 as it will lead to double counting of same revenue for two financial years. Therefore. the contention of State Commission on this account are rejected. Revenue in the True up of FY 2018-19 should be considered on billed basis as was being done prior to true up of FY 2018-19 as well as Post FY 2018-19 and matter need to remanded to State Commission to undertake True up of FY 2018-19 on actual billed Revenue along with applicable carrying cost.

16. The learned senior Counsel on behalf of State Commission has contended that the summary sheet annexed by TPL ('Provisional True-up for Ind AS-115 Accounting') is unreliable since it does not match any undisputed trued-up expense line item as approved by the Commission in Table 4.43 of the Truing-Up Order and submitted a table which showed various line items ranging from Rs .11 Crore to Rs 3.41 Crore with net ARR baseline discrepancy of Rs. 6.74 Crore. The State Commission has however not disputed the consideration of revenue on accrual basis. Since we intend remanding the matter, we do not feel it necessary to undertake scrutiny of each line item as submitted by Appellant submitted by TPL in compliance affidavit.

17. In view of above deliberations, we are of the view that Revenue in the True up should be considered on billed basis as was being done prior to true up of FY 2018-19 as well as Post FY 2018-19. Accordingly, the findings in the Impugned Order with regard to calculation of Revenue gap/ surplus considering the Revenue on accrual basis is set aside and matter is remanded to State Commission to undertake True up of FY 2018-19 on actual billed Revenue along with applicable carrying cost. Further, as noted above we do not feel it necessary

to undertake scrutiny of each line item as submitted by TPL in compliance affidavit, as State Commission may undertake prudence check of the same while carrying out fresh determination upon remand based on above direction. Appellant is directed to provide any information/ details so desired by State Commission. ISSUE B: Carrying cost APPEAL 475 of 2022

18. In the Impugned Order for True up of FY 2018-19 for Surat Circle, the revenue towards earlier years approved Gap/surplus has been acknowledged as Rs 75.28 Crore and has been accounted for while working out the Gap/(surplus) of Rs 85.29 Crore (Ref table 4.45 & 4.47). In the table 4.46, breakup of carrying cost and other consequential orders have been noted as Rs 38.34 Crore, as extracted hereunder, however no treatment has been accorded to it in the true up of FY 2018-19. “Table 4.46: Break-Up of carrying Cost and other Consequential Order/ Directions for TPL-D(S) claimed for FY 2018-19 Rs. Crore Particulars As Claimed Carrying Cost (Earlier Years’) 3.91 GERC audit (0.32) Delayed Payment Charges for FY 2016-17 2.91 APTEL Judgment in A. No. 257/2016 7.39 APTEL Judgment in A. No. 246/2017 24.45 Total 38.34

19. While working out the ARR for FY 2020-21, in the Impugned Order, Revenue gap of Rs 85.29 Crore for FY 2018-19 has been accounted for alongwith carrying cost, and impact of consequential orders of Rs 38.34 Crore has been allowed but without carrying cost, Table 5.6 is extracted hereunder: “Table 5.6: Break-Up of carrying Cost and other Consequential Order/ Directions for TPL-D(S) claimed for FY 2020-21 Rs. Crore Particulars As Claimed Carrying Cost (Earlier Years’) 3.91 GERC audit (0.32) Delayed Payment Charges for FY 2016-17 2.91 APTEL Judgment in A. No. 257/2016 7.39 APTEL Judgment in A. No. 246/2017 24.45 Sub-Total 38.34 Carrying Cost for FY 2018-19 (on Rs. 85.29 Crore)* 14.31 Total 52.65 *At weighted average rate of 8.39% (SBI Base Rate for the period) “ APPEAL 476 of 2022

20. In the Impugned Order for True up of FY 2018-19 for Dahej Circle, the revenue towards earlier years approved Gap/surplus has been acknowledged as Rs (7.08) Crore and has been accounted for while working out the Gap/(surplus) of Rs (5.41) Crore (Ref table 4.52 & 5.54). In the table 4.53, breakup of carrying cost and other consequential orders have been noted as Rs 5.38 Crore, as extracted hereunder, however no treatment has been accorded to it in true up for FY 2018-19.

“Table 4.53: Break-Up of carrying Cost and other Consequential Order/ Directions claimed for FY 2018-19 Particulars Rs. Crore Carrying Cost for years 2016-17 (1.25) Carrying Cost for years 2014-15 (0.50) APTEL Judgment in Appeal No. 256/2016 7.12 Delayed Payment Charges for FY 2016-17 & FY 2017-18 0.01 Total 5.38

21. While working out the ARR for FY 2020-21, in the Impugned Order, Revenue gap/(surplus) of Rs (5.41) Crore for FY 2018-19 has been accounted for along with carrying cost of Rs (0.91) Crore, impact of consequential orders of Rs 5.38 Crore though allowed but without carrying cost, Table 5.5 is extracted hereunder: “Table 5.5: Break-Up of carrying Cost and other Consequential Order/ Directions for TPL-D(D) claimed for FY 2020-21 Particulars Rs. Crore Carrying Cost for years 2016-17 (1.25) Carrying Cost for years 2014-15 (0.50) APTEL Judgment in Appeal No. 256/2016 7.12 Delayed Payment Charges for FY 2016-17 & FY 2017-18 0.01 Total 5.38 Carrying Cost for FY 2018-19 ON Rs. (5.41) Crore* (0.91) Total 4.48 *At weighted average rate of 8.39% (SBI Base Rate for the period)”

APPEAL 189 of 2023

22. In the Impugned Order for True up of FY 2018-19 for Ahmedabad Circle Appeal 475 of 2022),he revenue towards earlier years approved Gap/surplus has been acknowledged as Rs 332.32 Crore and has been accounted for while working out the Gap/(surplus) of Rs 281.24 Crore (Ref. table 4.45 & 4.47). In the table 4.46, breakup of carrying cost and other consequential orders have been noted as Rs 211.11 Crore, as extracted hereunder, however no treatment has been accorded to it in FY 2018-19. “Table 4.46: Break-Up of carrying Cost and other Consequential Order/ Directions for TPL-D(A) claimed for FY 2018-19 Rs. Crore Particulars As Claimed Carrying Cost (Earlier Years’) 46.43 GERC audit (0.58) Delayed Payment Charges for FY 2016-17 8.94 APTEL Judgment in A. No. 257/2016 15.70 APTEL Judgment in A. No. 246/2017 140.62 Total 211.11

23. While working out the ARR for FY 2020-21 for Ahmedabad Circle, in the Impugned Order, Revenue gap of Rs 281.24 Crore for FY 2018-19 has been accounted for along with carrying cost, however the impact of consequential orders of Rs 211.11 Crore has been allowed without carrying cost, Table 5.6 is extracted hereunder:

“Table 5.6: Break-Up of carrying Cost and other Consequential Order/ Directions for TPL-D(S) claimed for FY 2020-21 Rs. Crore Particulars As Claimed Carrying Cost (Earlier Years’) 46.43 GERC audit (0.58) Delayed Payment Charges for FY 2016-17 8.94 APTEL Judgment in A. No. 257/2016 15.70 APTEL Judgment in A. No. 246/2017 140.62 Sub-Total 211.11 Carrying Cost for FY 2018-19 (on Rs. 281.24 Crore) * 47.19 Total 258.30 *At weighted average rate of 8.39% (SBI Base Rate for the period)”

24. In all the three appeals, Appellant –TPL is aggrieved by non-consideration of carrying cost on Consequential orders as noted above and relied upon various judgements to contend that once a revenue gap for a past period is approved, the entitlement to carrying cost necessarily follows, being compensatory in nature representing restitution for the time value of money lost due to delayed recovery.

25. Per Contra, it has been submitted on behalf of State Commission that for Surat Circle Rs. 38.34 Crore was allowed for recovery under Table 5.8 in the year FY 2020-21 and likewise for other circles. It is further submitted that in terms of Regulation 21.6(c) of the MYT Regulations, carrying cost must be calculated on 'simple interest basis'. The deliberate inclusion of the adjective 'simple' acts as an express exclusion of compounding mechanics and placed reliance on Supreme Court's judgment in State of Haryana v. S.L. Arora & Co., (2 010) 3 SCC 690 and “DVPCA v. WBERC (Appeal No. 275 of 2015)”wherein it is held that in the absence of any express regulatory framework or contractual obligation

it is appropriate to award cost at simple interest and further contended that PSPCL Judgment (2022 SCC Online APTEL 46), relied upon by Appellant is not applicable to the present case since the field is fully occupied by Regulation 21.6(c), unlike the silent regulatory frameworks in the PSPCL context.

26. Appellant drew our attention to the State Commission’s Order dated 01.04.2023, passed in Petition No. 1765 of 2018 during the pendency of the present Appeals, which placed reliance on “Punjab State Power Corporation Limited v. CERC”, 2022 SCC Online APTEL 46 to hold that carrying cost becomes the part of cumulative Gap/(surplus) for the year in which it is allowed for recovery.

27. From the tables extracted above, it is evident that though carrying cost for previous years gap and impact of APTEL judgements has been claimed, acknowledged and quantified at the True up stage of FY 2018-19, but neither any treatment was accorded to it nor included in the overall revenue gap/ (surplus) while undertaking True –up for FY 2018-19. The amount so quantified in the true up stage of FY 2018-19 stage has been considered, albeit without any carrying cost while determining ARR for FY 2020-21.

28. The Appellant also made reference to Supreme Court judgment Uttar Haryana Bijli Vitran Nigam Ltd. v. Adani Power (Mundra) Ltd. (2023) 2 SCC 624, GMR Warora Energy Ltd. v. CERC (2023) 10 SCC 401 to hold that the grant of compound interest on carrying cost, and that too from the date of occurrence of the change in law event, was based on sound logic; the idea behind granting interest on carrying cost was aimed at restituting a party that was affected by a change in law event, and to restore it to its original economic position as if such a change in law event had not taken place; the contention that there was no provision in the PPA, for payment of compound interest from the

date when the change in law event occurred, necessitated rejection; the entire concept of restitutionary principles, engrained in the relevant Article of the PPA, was that a party should be compensated for the time value of money; and this principle would be required to be invoked for grant of interest on carrying cost on account of change in law event.

29. We would like to refer to the decision of Hon’ble Supreme Court in CITI Bank vs. Hiten P. Dalal : (2016) 1 SCC 411, wherein it has been held that, the law on restitution under Section 144 CPC was quite well settled; it vests expansive power in the court but such power has to be exercised to ensure equity, fairness and justice for both the parties; the court should adopt a realistic and verifiable approach instead of resorting to hypothetical and presumptive value; in the context of restitution, the court should keep under consideration not only the loss suffered by the party entitled to restitution but also the gain, if any,; and no unmerited injustice should be caused to any of the parties. In Suneja Towers Pvt. Ltd. vs. Anita Merchant: [(2023) 9 SCC 194], the Supreme Court referred with approval to Clariant International Ltd. v. SEBI, (2004) 8 SCC 524], wherein the Supreme Court had held that, in the absence of any agreement or statutory provision or mercantile usage, interest payable could only be at the market rate; and the interest could be payable upon establishing totality of circumstances justifying exercise of such equitable jurisdiction. The Supreme Court further held that the observations in Alok Shanker Pandey v. Union of India, (2007) 3 SCC 545 made it clear that there could be no hard-and-fast rule as to how much interest should be granted, and it would depend on the facts and circumstances of each case; however, interest is not considered to be a penalty or punishment but is considered to be a normal accretion on capital; for award of compound interest, relevant factors shall have to be taken into account which would include uncertainties of market and several other imponderables; awarding of compound

interest without examining other factors would only lead to unjust enrichment of the respondent in the name of disgorgement of benefits purportedly derived by the appellants.

30. Admittedly, carrying cost serves a very specific purpose in regulatory and financial contexts: the doctrine of awarding ‘carrying cost’ as bona fide compensation for the “time value of money” and therefore, must be given for the deprivation of the monies, when expenditure or revenue recovery is deferred. It is a settled legal principle (“Punjab State Power Corporation v. PSERC; 2022 SCC ONLine APTEL 46”; Reliance Infrastructure Ltd. v. MERC, 2012 SCC OnLine APTEL 154;) that where recovery of legitimate expenditure is deferred, the affected utility is entitled to carrying cost on the unrecovered sum. The rationale lies in the recognition of the time value of money and the financing burden borne by the utility during the period of non-recovery. The imposition of carrying cost ensures that the utility is placed in the same financial position as it would have been had timely recovery been permitted, thereby neutralizing the adverse impact of regulatory delay. Accordingly, the amount withheld from recovery need to be restituted with carrying cost at the rate determined under the applicable Regulations, so as to secure equity between the utility and the consumers and to uphold the integrity of the tariff determination process.

31. We find considerable merit in the submissions advanced on behalf of the Appellant that once a tariff order is modified pursuant to review or appellate proceedings, the doctrine of merger operates, whereby the modification does not remain a separate or collateral determination but becomes an integral part of the original tariff order itself. The consequence of such merger is that the amounts so approved or quantified in appellate adjudication necessarily form part of the approved past period gaps and, in turn, constitute the opening gap for the purpose of computation of carrying cost in subsequent regulatory exercises. It is,

therefore, irrational and legally untenable to deny carrying cost on such amounts at the stage of True Up for FY 2018–19, when those very amounts were ultimately accounted for in the ARR of FY 2020–21, but without carrying Cost. The principle of regulatory parity requires that the time value of money be preserved, and any regulatory lag neutralized, by allowing carrying cost on such sums from the date they became due until their eventual adjustment.

32. In the present case, Regulation 21.6 of the GERC MYT Regulations, 2016, assumes significance as extracted below: “c) Carrying cost to be allowed on the amount of Revenue Gap or Revenue Surplus for the period from the date on which such gap/surplus has become due, i.e., from the end of the year for which true-up has been done, till the end of the year in which it is addressed, calculated on simple interest basis at the weighted average State Bank Base Rate for the relevant year, i.e., the year for which Revenue Gap or Revenue Surplus is determined: Provided that carrying cost on the amount of Revenue Gap shall be allowed up to the above limit, subject to prudence check and submission of documentary evidence for having incurred the carrying cost in the years prior to the year in which the revenue gap is addressed;”

33. The Regulation explicitly and deliberately prescribes that carrying cost shall be calculated on simple interest basis at the weighted average State Bank Base Rate for the relevant year. The deliberate use of the adjective "simple" is a conscious legislative choice and, in terms of the principle of expressio unius est exclusio alterius, the express specification of simple interest operates as an equally express exclusion of compound interest. This principle was affirmed by the Hon'ble Supreme Court in State of Haryana v. S.L. Arora & Co. (2010) 3 SCC 690., wherein it was held that Compound Interest can be awarded only if there is a specific contract or authority under a statute, for compounding of

interest. There is no general discretion in courts or tribunals to award compound interest or interest on interest and reliance was placed on Renusagar Power Co. Ltd. V. General Electric Co.; 1994 Supp.(1) SCC 644, where it was held that interest on interest was not opposed to the public policy of India, but could ne awarded only if authorised by the contract or statute. Accordingly, as the mode of computation is statutorily fixed and therefore, this Tribunal can only accord simple interest where the governing Regulation has made the choice explicit.

34. Hon'ble Supreme Court in Uttar Haryana Bijli Vitran Nigam Ltd. v. Adani Power (Mundra) Ltd. (2023) 2 SCC 624 and GMR Warora Energy Ltd. v. CERC (2023) 10 SCC 401 upheld the grant of compound interest on carrying cost in the context of change-in-law events under PPAs, those decisions operated in a contractual and restitutionary framework where no express regulatory prescription governed the mode of interest. The present case is materially distinguishable — Regulation 21.6(c) expressly occupies the field and prescribes simple interest as the applicable mode. Where the subordinate legislation has made an explicit provision, equitable or restitutionary principles cannot be invoked to override or supplement the statutory mandate.

35. We, therefore, hold that the amounts quantified pursuant to appellate adjudication merge with the original tariff order, form part of the approved past period gaps, and necessarily attract carrying cost from the date they became due until their eventual accounting in the ARR, in conformity with Regulation 21.6 of the GERC MYT Regulations, 2016. Accordingly, the issue is remanded to State Commission to work out the carrying cost, in all the three appeals in terms of Regulations on the amount so quantified during FY 2018-19, true up stage, on which the carrying cost was not considered by the State Commission in the ARR for FY 2020-21.

CONCLUSION

Our finding on both the issues are summarized as under: Issue A: Consideration of provisional revenue instead of Accrual Revenue while determining Gap/surplus during True up of FY 2018-19: Findings in the Impugned Order with regard to calculation of Revenue gap/ surplus considering the Revenue on accrual basis is set aside and matter is remanded to State Commission to undertake True up of FY 2018-19 on actual billed Revenue along with applicable carrying cost, after prudence check of the data submitted by Appellant. Appellant is directed to provide any information/ details so desired by State Commission. Issue B: Carrying Cost Issue is remanded to State Commission to work out the carrying cost, in all the three appeals in terms of Regulations on the amount quantified during FY 2018- 19, true up stage, on which the carrying cost was not considered by the State Commission in the ARR for FY 2020-21. The Captioned Appeals and pending IAs if any are disposed of in above terms. PRONOUNCED IN THE OPEN COURT ON THIS 08th DAY OF JULY , 2026. (Virender Bhat) Judicial Member (Seema Gupta) Officiating Chairperson REPORTABLE / NON-REPORTABLE Pr/dk/ak/ag